Clinton administration imposes surprise freeze on new contracts at RTC

March 31, 1993|By Los Angeles Times

WASHINGTON -- The Clinton administration, disturbed by what it considers sloppy supervision and runaway spending at the Resolution Trust Corp., has imposed an unprecedented 30-day freeze on new contracts at the thrift cleanup agency.

Deputy Treasury Secretary Roger Altman, acting chief executive of the RTC, has ordered a full-scale review of the contracting process, a Treasury Department spokeswoman said yesterday.

Interviews indicate that lower-level employees of the cleanup agency have routinely violated the RTC's system of internal controls and authorized the expenditure of large sums of taxpayer money without the proper approvals.

The surprise freeze, quietly imposed last week, is the first temporary halt in RTC activities since the agency was created in mid-1989 to manage the cleanup the failure-ridden savings and loan industry.

The Clinton administration is eager to demonstrate to Congress that it has firm control over the RTC because lawmakers are now mulling a White House request for $45 billion to finish the cleanup effort.

Mr. Altman is said to be especially concerned about the way in which the RTC handled contracts at the failed HomeFed Bank in San Diego. At least two government investigations of activities at HomeFed are now under way, including one inquiry by the RTC's own inspectorgeneral, sources close to the probe say.

Investigators are also looking at the management of contracts awarded to at least three different firms whose job it was to verify the condition of the HomeFed assets -- namely loans and real estate -- before they were sold by RTC.

RTC officials who handled the asset sales apparently agreed to broaden the work assignments and increase payments without the approval of the RTC's own contracts division, according to one government investigator who insisted on anonymity.

The RTC sales officials "handed out more money without clearance," the investigator said yesterday. "They told the contractors: 'You do the work and we will reach an agreement later on the increased price.' But they had no right to do that."

The Treasury Department spokeswoman confirmed yesterday that one of the contracts under investigation involves an agreementwith Arthur Andersen, the large accounting firm.

The Clinton administration learned from the General Accounting Office that an RTC employee in the field "made a unilateral decision" to broaden the scope of the contract, the spokeswoman said.

The RTC already has been embarrassed at HomeFed by revelations that it paid the accounting firm of Price Waterhouse 67 cents a page to copy more than 11 million pages of documents.